Supply chain fraud high despite analytics use

16 November 2017

Levels of supply chain fraud remain high despite an increase in organisations using analytics to mitigate fraud, waste and abuse, according to a Deloitte survey.

The accounting firm said more than 3,200 supply chain professionals in the US were surveyed about their use of supply chain forensics and analytics.

The respondents worked in consumer and industrial products, financial services, technology, media and telecommunications, life sciences and healthcare, and energy and resources.

The survey found that the use of analytics to combat third-party supply chain fraud, waste and abuse risk had jumped from 25.2% in 2014 to 35% in 2017.

However, an average 30.8% of those surveyed said they had reported at least one instance of supply chain fraud, waste and abuse in the prior year.

Mark Pearson, Deloitte Risk and Financial Advisory (DRFA) forensic principal, said although it was good news that more organisations were using fraud analytics, there still needed to be a constant effort to mitigate abuse.

“It’s encouraging to see more organisations using analytics to help prevent and detect financial abuses within supply chains each year,” he said.

“Unfortunately, increased vigilance doesn’t translate into lower instances of fraudsters trying to perpetrate their schemes— even the most advanced analytics users should work to constantly evolve their efforts to stem supply chain fraud, waste and abuse.” 

Deloitte said for the third time in four years, consumer and industrial product professionals reported the highest level of supply abuse over the past 12 months, at 39%—unchanged from last year.

Respondents from the energy and resources industry also reported an unchange rate of financial abuse of 35% from 2016 to 2017. 

Life sciences and health care professionals noted a marked decline in 2017, at 26%, down from 37% in 2016.

Larry Kivett, DRFA forensic partner, said supply chain executives could help prevent financial abuse by improving supplier paperwork. 

“In the energy and resources industry, I’ve seen complex capital projects rife with bribery, bid rigging, collusion, fraud and other schemes,” he said.

“Beyond reducing sole-sourced procurement to manage risk, supply chain executive can also prevent financial abuses by working to improve supplier invoicing timeliness, accuracy and approval processes.”

Pearson added that although life sciences and healthcare fraud had dropped off, the sector still needed to remain consistently vigilant.

“I wouldn’t take that slowdown as a reason for supply chain executives to get comfortable,” he said.

“Even in highly regulated industries, there are still motives for bad actors to commit supply chain abuses. Managing supply chain risk is a constant effort.”

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